RISK IDENTIFICATION AND ALLOCATION IN UNDERGROUND RAIL CONSTRUCTION JOINT VENTURES IN SINGAPORE

Abstract

The Singapore government first initiated the preferential margin scheme (PMS) in the 1980s to encourage foreign firms to form international construction joint ventures (ICJVs) with local contractors. This was to allow indigenous contractors to bid for public sector projects and depend less on their foreign counterparts. At that time, ICJVs were mainly formed for the construction of underground Mass Rapid Transit (MRT) projects. Although PMS was later scrapped, the formation of ICJVs to bid for such projects still continued.

This study aims to explore the risk allocation process through identification of risk factors in underground rail ICJV projects. A survey was conducted to explore the criticality of the risk groups and preferred risk allocation strategies from foreign and local contractors. Respondents were also requested to rank the importance of risk allocation obstacles encountered based on a five-point Likert scale to investigate how the risk allocation process can be further enhanced.

The results establish that there were strong associations between local and foreign firms in regards to the attractive and negative factors as well as the risks in ICJVs. Respondents placed emphasis on the management of the relationship between partners instead of the project management itself. However, it was found that the main problem foreign contractors encountered was the differences in culture and working styles while local contractors were more concerned with the unclear division of responsibilities.

With these results, it is hoped that ICJV participants can better manage and cope with risks in future MRT construction projects. This study may serve as a guide for them on what to take note in risk management and enhance the risk allocation process in ICJVs. Since underground MRT construction will continue until 2020, the findings from this study would be useful for participants in identifying critical risks and the most efficient risk allocation framework in the early stages of project development.